Tag Archives: Chapter 13

Eighth Circuit BAP Allows Strip Off of Wholly Unsecured Lien in Chapter 20 (7+13)

6 Sep

The Eighth Circuit BAP found that a chapter 13 debtor may strip off a wholly unsecured lien on his principal residence even where the debtor is otherwise not entitled to discharge. In re Fisette, 11-6012 (B.A.P. 8th Cir., August 29, 2011). In so holding the court joined the majority of Circuit and BAP courts that have held that the reasoning in Nobelman v. Am. Savings Bank, 508 U.S. 324 (1993) establishes the right to strip off wholly unsecured residential liens. Turning to the issue of whether ineligibility for discharge under section 1328(f)(1) precludes the otherwise permissible lien stripping, the court stated: “We hold that the strip off of a wholly unsecured lien on a debtor’s principal residence is effective upon completion of the debtor’s obligations under his plan, and it is not contingent on his receipt of a Chapter 13 discharge.” Unlike the courts that have found that section 1325(a)(5) precludes lien-stripping in a chapter 20, the Fisette court found that, pursuant to the statutory language, the requirements of section 1325(a)(5) were not applicable to a lien which was unsecured. The court concluded its analysis with a finding that the creditors whose liens were stripped would be entitled to distribution of the estate along with the other unsecured creditors.

Tim McCandless Blogs its amazing what you can do if you don’t watch TV

1 Sep

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Things You Must Do Prior to Filing Bankruptcy

16 Oct

Stop using your credit cards and don’t incur any additional credit.
Once you have made the decision to file bankruptcy, you should not use your credit cards nor incur any additional credits from that point forward. Any recent purchases or advances can be held as still due and owing after you file bankruptcy. The rational is that you never intended to pay those debts back and is similar to fraud. If you’re seeking a fresh start, do your best to insure that you will in fact receive that fresh start. The credit card issuers are very aware of attempts to run-up the charges on credit cards. This also applies to cash advances. If you take a cash advance too close to filing bankruptcy, you are likely to see an objection from the credit card issuer. The objection comes in the form of an adversarial complaint. If the creditor is successful in their objection, the amount of the recent advance(s) will be held due and owing after your bankruptcy case.

Take the required credit counseling briefing
Before a Chapter 7 bankruptcy case can be filed, a person must take a credit counseling briefing from an approved credit counseling agency. This credit counseling briefing can be done on the internet or by telephone. The entire briefing typically takes less than one hour and at the time of this writing, costs approximately $50.00. The credit counseling briefing requires the debtor to provide information as to their monthly income and expenses as well as a listing of their creditors. This briefing must be completed within 180 days prior to filing bankruptcy.

File your taxes
You must file your most recent year’s taxes to qualify for Chapter 7 bankruptcy relief. Although this seems like a simple requirement, you would be amazed at the number of individuals who have not filed their most recent taxes. A copy of the return will be forwarded to your assigned bankruptcy trustee after your case is filed. You must also provide your most recent tax return to any creditor who requests it.

Provide your most recent paychecks
You must provide the most recent 60 days worth of paycheck stubs at the time your case is filed. These will be forwarded to your assigned bankruptcy trustee or may be filed with the clerk of the bankruptcy court. This measure is in place to make sure that the amount listed on the petition for monthly income is in fact accurate. If a person receives income from a source other than employment, evidence of that income must be provided just as if a paycheck stub. Once you are aware that you are likely going to file bankruptcy, keep copies all of your paycheck stubs in an organized manner.

Get Your Paperwork in Order
Collect all statements from bill collectors. Go online and get complete addresses of creditors who may have stopped billing you. Check the balances at financial institutions where you bank. Look at your recent tax returns to provide your gross income over the past three years. Basically, get to know your assets and liabilities and have them written out and organized for your lawyer to prepare your case. Gather a listing of all of all of your debts.

The more complete you can be in providing a list of your creditors, the less problems or headaches you will have from creditors after your bankruptcy case is over. Once you know that you are going to file, start to save all correspondence that arrives from creditors, collection agencies or others who are trying to collect on a debt. The disclosure requirements have become more stringent so you want to make sure that your have forwarded all of your creditor information to your attorney. If you are unsure of exactly who you may owe, you may want to consider acquiring a copy of your most recent credit reports. Each year you may request a free copy of your credit reports from the three major credit bureaus reporting companies. Those are TransUnion, Equifax and Experian and they can be obtained by going to www.annualcreditreport.com. Even if you are unaware of the creditors listed on your reports, provide those to your attorney anyway. When you seek credit, after your filing, for a mortgage, auto loan, or personal loan, you want to be able to show that all of the items on your credit report were listed and discharged in your bankruptcy case. The rule to remember is to list everybody and their grandmother on your bankruptcy petition and schedules. This way you can be assured that you are not leaving anyone out of the bankruptcy.

Check and review your petition for accuracy
Your attorney will prepare your bankruptcy petition and schedules primarily based upon the information and disclosures that you have provided. The petition and schedules will then need to be reviewed and signed by you. Do not take this step lightly. You are verifying that the information is true and correct to the best of your knowledge and that all of your assets and liabilities are listed. This is the time to double check the itemized list of creditors shown on the petition and schedules with your known list of creditors. You also want to make sure that your home, vehicle or other assets are properly listed and exempted to the full extent of the chosen law. Remember, your petition and schedules are a legal document signed under oath. Take the time to insure that they are true and accurate.

Pay your attorney or make payment arrangements
Most attorneys will want to be paid in full before they file your case. If they don’t, there is a chance that their fees may be discharged in the bankruptcy. All attorneys’ fees come under the scrutiny of the United State’s Trustee’s office and the bankruptcy court judges. They will monitor whether the fees charged in a Chapter 7 bankruptcy case are excessive. They will also determine whether or not the attorney had collected fees from his client when the debt was discharged. A debtor should be aware that there might be additional fees charged for filing amendments to the petition and schedules and for missed court dates. It is a good idea to get the attorney fee issue out of the way as early as possible. It is often the main reason why in certain circumstances, a case never gets filed.

An individual Chapter 11 bankruptcy may be better for you than Chapter 13

28 Jan

by Chip Parker, Jacksonville Bankruptcy Attorney on October 25, 2009 · Posted in Chapter 11 Bankruptcy

In my 17 years of practicing bankruptcy law, I have never been as excited by anything as the development of the individual Chapter 11 case.

Traditionally, Chapter 13 has been used for personal reorganizations while Chapter 11 has been reserved for more complex corporate reorganizations.� However, a small handful of sophisticated bankruptcy lawyers, like Brett Mearkle of Jacksonville, Florida and BLN contributors Brett Weiss and Kurt O�Keefe, are taking advantage of the debtor-friendly rules of Chapter 11, to provide more meaningful debt restructuring for individual consumers.

Before 2005, individual Chapter 11 cases were virtually non-existent. However, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, which has generally been horrible for individual debtors, changed a critical rule in Chapter 11 that has made it the choice for bankruptcy lawyers seeking the best restructuring options for many middle-class Americans.� That rule, known as the Absolute Priority Rule, no longer applies to individuals filing under Chapter 11.� The result is that, unlike corporate debtors, an individual (or married couple) filing under Chapter 11 does not have to repay 100% of his unsecured debts.� Rather, the individual need only pay his �disposable income� over a 5 year period, just like in Chapter 13 cases.

The challenge for bankruptcy lawyers is streamlining the Chapter 11 case for consumers to bring the overall cost of filing down.� Currently, my firm has managed to bring down the cost of a typical Chapter 11, but even so, the individual Chapter 11 case costs $10,000 to $30,000, depending on the facts.� However, in as many as half of all consumer reorganizations, these increased fees and costs are far outweighed by the savings and convenience of Chapter 11.

These savings, like �cram down� of automobiles and elimination of the trustee�s administrative fee, will be discussed in more detail in my upcoming articles.

The change to the Absolute Priority Rule has gone widely unnoticed by consumer bankruptcy lawyers, largely because so few understand Chapter 11.� However, we are starting to realize the power of Chapter 11 for consumers, and a concerted effort is being made by many to understand this complicated area of bankruptcy law.� I’ll be in Tucson next week, attending a three day seminar conducted by The National Association of Consumer Bankruptcy Attorneys to learn how to identify which consumers will benefit from Chapter 11 and how to file these types of bankruptcies.� Of course a three-day seminar is really the beginning of an education in Chapter 11, and I predict there will be more advanced seminars to follow.

Be on the lookout for more articles and videos by me and other BLNers on the advantages and nuances of the individual Chapter 11.

Mortgage Chaos? Add a Bankruptcy and its a Recipe for Disaster! Part II

20 Dec

My last article laid out the framework for the bankruptcy real estate cocktail. This article will attempt to predict how that cocktail will be served and its ramifications. Remember, this recipe for disaster requires two things: a “Non-Perfected” Mortgage and a Bankruptcy.

So far, about 70 to 80% of the mortgages I see in local Bankruptcy cases here in the Southern District of California Bankruptcy Court appear to be non-perfected. Despite my continued requests to the mortgage companies to produce either proof they possess the underlying note or proof of a recorded assignment, I have received neither. Instead I get the run around, “Yes we have the original note. Really, can I see? Actually no, I thought we had the original, but we have a copy…………Yes we have the assignment. Really, can I see? Sure, here you go. But that was not recorded. Oh…….” Its the same song and dance. So what becomes of this?

Chapter 7: The trustee will most likely put on his “544 hat” and now “strip the lien off the house.”

When he does this, he creates an unencumbered piece of real estate in most cases, with the exception of a small amount of past taxes and HOA fees remaining as liens on the property. The property is then sold and net profits held in trust. A notice is then sent to the creditors of the bankruptcy to submit a claim if they want to get paid.

The claims are then reviewed, and paid pro-rata or objected to with the Bankruptcy Court issuing the final ruling. The Claims process is a complex area too lengthy to discuss for this Blog, but suffice to say, many claims will be objected to as well, since most credit card debt and collection agents have similar problems in proving they too own their debts. Moreover, you might ask what happens to the mortgage lien which has now become a large unsecured debt? It might be paid, provided they can prove they own the note. However, it also may not. There is a Bankruptcy Code section, 11 USC 502(d) which states that a creditor may not be able to share in the distribution if they did not give up there lien when requested by the trustee under 544. So, it could be that any remaining monies may even go back to the debtor if the new unsecured mortgage claim is disallowed! But this remains a grey area, and time will tell.

But what if the debtor wants to keep the house? No problem. Time to make a deal with the trustee. Suppose that the House was bought for $650,000 in 2006 with 100% financing and now is worth $500,000. The debtor is negative $150,000 in equity. Upside Down! Now lets say a bankruptcy is filed. The Mortgage Note was not perfected so Bankruptcy Trustee avoids the lien. Now he has this $500,000 piece of real estate that he wants to sell, but the debtor wants to keep it. So the debtor makes an offer of $430,000 to keep the house and the Trustee agrees. Trustee agrees since he would only net $430,000 anyways after costs of sale, attorney fees, marketing, etc. Debtor gets the $430,000 from a new loan he might qualify for, have cosigned, or have a family member engage their credit. Trustee then takes the $430,000 and distributes to creditors, which include the debtor’

s non-dischargeable taxes, non-dischargeable child support obligations, and non-dischargeable student loans.

Wow! Lets get this straight: Mortgage reduced from $650,000 to $430,000, and over $100,000 in non-dischargeable bankruptcy debt consisting of student loans, taxes, and support obligations also paid, and all other debt wiped out? Sounds like the lemon just turned into lemonade! Also, time to also read the blog on why the credit score is much better after bankruptcy than before now.

Chapter 13: In Chapter 13, the Trustee does not liquidate assets. Instead, he administers a three to five year plan by distributing the monthly payments from the debtor to the creditors, and the avoidance powers of the Chapter 7 Trustee are given to the Debtor(at least here in the Ninth Circuit….western states in the US). This includes the power to remove unperfected liens such as unperfected mortgages.

So now the debtor can remove the mortgage just like a Chapter 7 Trustee.

But that might be a problem. The Chapter 13 Trustee may object now to the bankruptcy since the debtor has too many assets. Well, as discussed above, time to get another smaller mortgage, pay that money into the Chapter 13 plan, and again pay off the non-dischargeable debt. Even better, if not all the creditors filed claims, the money then reverts to the debtor!

In the alternative, the simple threat of litigating the issues to remove the mortgage sure makes for a great negotiating tool to deal with the lender and rewrite the mortgage…..knocking off possibly hundreds of thousands of dollars and also lowering the interest rate substantially.

Involuntary Bankruptcies? Is there such a thing? Unfortunately, YES. And this could be very problematic. If several creditors are owed substantial sums of money, say a SBA Loan, large Medical Bill, or even large credit cards, they could petition the court for an involuntary bankruptcy. The debtor has no control to stop it. Next thing the debtor knows, he is in a bankruptcy and all the property is being liquidated, less the property allowed by exemption law. Then steps up the Chapter 7 Trustee and discovers that the Mortgage is not perfected. Well, there goes the house now! Or does it?

Once again, a smart debtor would argue to the trustee that he will get a loan to pay the trustee as discussed above. Problem solved, and what appears to be disaster at first, may be a blessing in disguise. The debtor keeps his home with a much smaller mortgage and removes non-dischargeable debts. He is better off now than before, even though he did not want this!

So the Recipe for Disaster appears to only affect the Mortgage Companies. They are the losing parties here, and rightly so for getting sloppy…..attempting to save $14 per loan times thousands of loans. Why didn’t they compute losing hundreds of thousands of dollars per loan times thousands of loans? Couldn’

t they connect the dots? No…..like I said, lots of smart Real Estate Attorneys and lots of smart Bankruptcy Attorneys, but not too many Bankruptcy Real Estate Attorneys and none of them worked for the Mortgage industry.

But everyone else now seems to win. The debtor reduces his mortgage, gets a better interest rate, and eliminates the rest of his debts. The trustee makes a healthy profit on distributing such a large dividend to creditors. And the creditors who obey the law now share in a large dividend.

Of course, all the forgoing is Brand New. It has not been done yet in any cases I am aware of. But since talking with other Bankruptcy Attorneys across the Nation for the past couple weeks, its starting to catch on. I’

m told a few trustees back east have started this procedure now. And just today, I get an announcement from our local Chapter 7 Trustee that he is making new requirements concerning producing documents in all cases before him so that he can start avoiding these liens. Coincidentally, this also comes after three of our Local Bankruptcy Judges started denying relief to Mortgage Creditors when coming before the Bankruptcy Court during the past week! Its brand new…but catching on like wildfire.

Housing Bubble? Mortgage Bubble? Well now it’

s a Housing Mortgage Bubble disaster about to happen in Bankruptcy Court. Congress was not able to reform the predatory lending abuses. The Lenders certainly do not seem interested in workout programs. I guess its time for a Bankruptcy Cocktail!

Written by Attorney Michael G. Doan

EMERGENCY!! TAKE ACTION RIGHT NOW… SAVE BANKRUPTCY REFORM!

10 Dec

2009-12-10 — ml-implode.com

“House Rules Committee agreed to allow the bankruptcy modification amendment THAT WOULD ALLOW JUDGES TO MODIFY MORTGAGES to be considered on the House floor as an amendment to the broader financial services reform bill AS EARLY AS THIS AFTERNOON!!”

How to Stop Foreclosure

5 Dec

This is general information and assumes that you have access to the rest of the material on the blog. Foreclosures come in various flavors.

First of all you have non-judicial and judicial foreclosure states. Non-judicial basically means that instead of signing a conventional mortgage and note, you signed a document that says you give up your right to a judicial proceeding. So the pretender lender or lender simply instructs the Trustee to sell the property, giving you some notice. Of course the question of who is the lender, what is a beneficiary under a deed of trust, what is a creditor and who owns the loan NOW (if anyone) are all issues that come into play in litigation.

In a non-judicial state you generally are required to bring the matter to court by filing a lawsuit. In states like California, the foreclosers usually do an end run around you by filing an unlawful detainer as soon as they can in a court of lower jurisdiction which by law cannot hear your claims regarding the illegality of the mortgage or foreclosure.

In a judicial state the forecloser must be the one who files suit and you have considerably more power to resist the attempt to foreclose.

Then you have stages:

STAGE 1: No notice of default has been sent.

In this case you want to get a forensic analysis that is as complete as humanly possible — TILA, RESPA, securitization, title, chain of custody, predatory loan practices, fraud, fabricated documents, forged documents etc. I call this the FOUR WALL ANALYSIS, meaning they have no way to get out of the mess they created. Then you want a QWR (Qualified Written Request) and DVL (Debt Validation Letter along with complaints to various Federal and State agencies. If they fail to respond or fail to answer your questions you file a suit against the party who received the QWR, the party who originated the loan (even if they are out of business), and John Does 1-1000 being the owners of mortgage backed bonds that are evidence of the investors ownership in the pool of mortgages, of which yours is one. The suit is simple — it seeks to stop the servicer from receiving any payments, install a receiver over the servicer’s accounts, order them to answer the simple question “Who is my creditor and how do I get a full accounting FROM THE CREDITOR? Alternative counts would be quiet title and damages under TILA, RESPA, SEC, etc.

Tactically you want to present the forensic declaration and simply say that you have retained an expert witness who states in his declaration that the creditor does not include any of the parties disclosed to you thus far. This [prevents you from satisfying the Federal mandate to attempt modification or settlement of the loan. You’ve asked (QWR and DVL) and they won’t tell. DON’T GET INTO INTRICATE ARGUMENTS CONCERNING SECURITIZATION UNTIL IT IS NECESSARY TO DO SO WHICH SHOULD BE AFTER A FEW HEARINGS ON MOTIONS TO COMPEL THEM TO ANSWER.

IN OTHER WORDS YOU ARE SIMPLY TELLING THE JUDGE THAT YOUR EXPERT HAS PRESENTED FACTS AND OPINION THAT CONTRADICT AND VARY FROM THE REPRESENTATIONS OF COUNSEL AND THE PARTIES WHO HAVE BEEN DISCLOSED TO YOU THUS FAR.

YOU WANT TO KNOW WHO THE OTHER PARTIES ARE, IF ANY, AND WHAT MONEY EXCHANGED HANDS WITH RESPECT TO YOUR LOAN. YOU WANT EVIDENCE, NOT REPRESENTATIONS OF COUNSEL. YOU WANT DISCOVERY OR AN ORDER TO ANSWER THE QWR OR DVL. YOU WANT AN EVIDENTIARY HEARING IF IT IS NECESSARY.

Avoid legal argument and go straight for discovery saying that you want to be able to approach the creditor, whoever it is, and in order to do that you have a Federal Statutory right (RESPA) to the name of a person, a telephone number and an address of the creditor — i.e., the one who is now minus money as a result of the funding of the loan. You’ve asked, they won’t answer.

Contemporaneously you want to get a temporary restraining order preventing them from taking any further action with respect to transferring, executing documents, transferring money, or collecting money until they have satisfied your demand for information and you have certified compliance with the court. Depending upon your circumstances you can offer to tender the monthly payment into the court registry or simply leave that out.

You can also file a bankruptcy petition especially if you are delinquent in payments or are about to become delinquent.

STAGE 2: Notice of Default Received

Believe it or not this is where the errors begin by the pretender lenders. You want to challenge authority, authenticity, the amount claimed due, the signatory, the notary, the loan number and anything else that is appropriate. Then go back to stage 1 and follow that track. In order to effectively do this you need to have that forensic analysis and I don’t mean the TILA Audit that is offered by so many companies using off the shelf software. You could probably buy the software yourself for less money than you pay those companies. I emphasize again that you need a FOUR WALL ANALYSIS.

Stage 3 Non-Judicial State, Notice of Sale received:

State statutes usually give you a tiny window of opportunity to contest the sale and the statute usually contains exact provisions on how you can do that or else your objection doesn’t count. At this point you need to secure the services of competent, knowledgeable, experienced legal counsel — professionals who have been fighting with these pretender lenders for a while. Anything less and you are likely to be sorely disappointed unless you landed, by luck of the draw, one of the increasing number of judges you are demonstrating their understanding and anger at this fraud.

Stage 4: Judicial State: Served with Process:

You must answer usually within 20 days. Failure to do so, along with your affirmative defenses and counterclaims, could result in a default followed by a default judgment followed by a Final Judgment of Foreclosure. See above steps.

Stage 5: Sale already occurred

You obviously need to reverse that situation. Usually the allegation is that the sale should be vacated because of fraud on the court (judicial) or fraudulent abuse of non-judicial process. This is a motion or Petitioner but it must be accompanied by a lawsuit, properly served and noticed to the other side. You probably need to name the purchaser at sale, and ask for a TRO (Temporary Restraining Order) that stops them from moving the property or the money around any further until your questions are answered (see above). At the risk of sounding like a broken record, you need a good forensic analyst and a good lawyer.

Stage 6: Eviction (Unlawful Detainer Filed or Judgment entered:

Same as Stage 5.

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